Thursday Watch

Evening Headlines

Bloomberg:

• U.S.-China Trade Talks Grind to a Halt.  

• Electric Vehicle Surge Poised to Test U.K. Grid for Decades.

• Asia Stocks Set for Mixed Start; Oil Plunges. Asia stocks are set for a muted start to trading Thursday as investor concerns around a trade war between the U.S. and China showed little sign of abating. The dollar rose and crude oil plunged the most in two years. Equity futures in Japan pointed to modest gains while those in Hong Kong and Sydney signaled slight declines. The S&P 500 dropped the most in two weeks, as energy and material producers tumbled on renewed angst that the Trump administration’s trade stance willdamp demand for commodities. Oil’s retreat took West Texas crude toward $70 a barrel, while metals and crop futures also slid. The dollar saw the biggest rise in a month, while the Japanese yen and Chinese offshore yuan dropped. Ten-year Treasury yields were little changed. Futures on the Nikkei 225 rose 0.3 percent in Singapore. SPI 200 futures fell 0.1 percent. Hang Seng futures fell 0.2 percent. Futures on the S&P 500 Index advanced 0.1 percent.

• Five Things You Need to Know to Start Your Day.

• Bond Traders Now Betting Rate Cut Just as Likely as Hike in 2020.  

• Fed’s John Williams Says Low Unemployment Is Spurring More Job Training.  

• Stocks Quants Are Reeling From the Worst Run in 8 Years.

Wall Street Journal:

• Trump Urges NATO to Double Military-Spending Target. 

• Senate’s First Skirmish Over Supreme Court Pick: How Quickly to Move.

• Thai Cave Rescue, Before Its Triumph, Teetered on the Brink of Disaster.

• ZTE Poised to Resume Business With U.S. Suppliers.

• Twitter Follower Numbers to Drop as It Removed Locked Accounts.

• Metals Slide Deepens as Trade Fears Escalate.

MarketWatch.com:

• The 7 reasons behind U.S. oil’s sharpest daily point drop in almost 3 years.

Fox News:

• Partisan opposition to president’s Supreme Court picks intensifies big-time under Trump.

CNBC:   

• Broadcom(AVGO) to acquire CA Technologies(CA) for $18.9 billion.

• Tesla whistleblower retains law firm famous for winning $22.5 million Monsanto suit.

• China has its currency to use as a weapon in trade war with Trump.

• Comcast increases cash offer for Sky to $34 billion, topping Twenty-First Century Fox. 

• After-hours buzz: AVGO, CA & more.

• Trump's China trade bashing gives new hope for NAFTA progress.

Zero Hedge:

• Lisa Page Lying About Access To FBI Docs In Excuse To Bail On Testimony: Meadows.

• US-China Trade Negotiations Have Collapsed.

• Seven Takeaways From The US Tariff Escalation.

• In Unprecedented Move, Rosenstein Asks 100s Of Prosecutors To Review SCOTUS Pick's Records.

• Trump Doubles Down: Threatens Sanctions On European Investors In Russian Pipeline.

• Trade War Becomes "Tech War" As Trump Cracks Down On China's Rare Earth Metals.

• Trump Slams NATO: "Pay 2% Of GDP IMMEDIATELY" Or Even 4%.

• Bond Bears Reach Record High As Big Money Managers Bet Billions On 'Growth'.

• Parkland Survivors Sue Broward Law Enforcement Officials; Allege Incompetence, Poor Training And Cowardice.

• Trump Tariff Threat Sparks Commodity Carnage, Yield Curve Crash, Stock Slump.

Business Insider:

• New Zealand and China are butting heads over Beijing's growing influence.

• Mexico's new president will probably keep its secretive billion-dollar oil hedge going.

• Social security and Medicare could add trillions to the national debt.

Night Trading 

• Asian equity indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 94.0 +2.25 basis points. 

• Asia Pacific Sovereign CDS Index 14.75 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 69.38 +.03%.

• FTSE 100 futures -.03%.

• S&P 500 futures +.10%.

• NASDAQ 100 futures +.03%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (CBSH)/.89

• (DAL)/1.72

After the Close:

• None of note

Economic Releases 
8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 225K versus 231K the prior week.

• Continuing Claims are estimated to fall to 1730K versus 1739K prior.

• The CPI MoM for June is estimated to rise +.2% versus a +.2% gain in May.

• The CPI Ex Food and Energy MoM for June is estimated to rise +.2% versus a +.2% gain in May.

• Real Avg. Hourly Earnings for June.

2:00 pm EST

• The Monthly Budget Deficit for June is estimated at -$80.0B versus -$146.8B in May.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kashkari speaking, Eurozone Industrial Production report, $14B 30Y T-Bond auction, WasDe Crop report, weekly Bloomberg Consumer Comfort Index, FCC Open Meeting and the (BKE)/(CATO)/(LB) Monthly Sales reports could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by consumer and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Lower into Final Hour on Trade War Fears, Oil Decline, Emerging Markets Debt Angst, Commodity/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.74 +8.6%

• Euro/Yen Carry Return Index 136.14 +.29%

• Emerging Markets Currency Volatility(VXY) 10.0 +4.3%

• S&P 500 Implied Correlation 33.14 +1.4%

• ISE Sentiment Index 90.0 -15.9%
  

• Total Put/Call 1.0 +1.0%

• NYSE Arms 1.72 +135.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.95 +.99%
  

• America Energy Sector High-Yield CDS Index 386.0 +.85%

• European Financial Sector CDS Index 81.69 +2.09%

• Italian/German 10Y Yld Spread 232.25 -3.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 14.79 +2.64%

• Emerging Market CDS Index 179.44 +4.83%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.13 -.09%

• 2-Year Swap Spread 23.5 -.75 basis point

• TED Spread 36.75 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -2.25 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.51 -.86%
• 3-Month T-Bill Yield 1.96% -1.0 basis point
  

• Yield Curve 27.0 -1.25 basis points

• China Iron Ore Spot 63.35 USD/Metric Tonne +.16%

• Citi US Economic Surprise Index 13.90 unch.

• Citi Eurozone Economic Surprise Index -36.20 +.5 point

• Citi Emerging Markets Economic Surprise Index .3 +2.0 points

• 10-Year TIPS Spread 2.12 -1.0 basis point
  
• 86.2% chance of Fed rate hike at Sept. 26th meeting, 86.6% chance at November 8th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +93 open in Japan 
• China A50 Futures: Indicating -109 open in China

• DAX Futures: Indicating -15 open in Germany

Portfolio: 

• Lower: On losses in my industrial/retail/tech sector longs

• Disclosed Trades:Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value -.8%

Sector Underperformers:

• 1) Gold & Silver -2.7% 2) Steel -2.7% 3) Oil Service -2.7%

Stocks Falling on Unusual Volume: 

• ANGO, FUN, AIR, PETQ, TUR, MSM, AAL, HOME, FND, PAAS and HTZ

Stocks With Unusual Put Option Activity:

• 1) GOGO 2) FOSL 3) FAST 4) LNG 5) CYH

Stocks With Most Negative News Mentions:

• 1) TDS 2) USM 3) YEXT 4) CPA 5) WLK

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.3%

Sector Outperformers:

• 1) Education +1.1% 2) Utilities +.8% 3) Internet +.4%

Stocks Rising on Unusual Volume:

• FAST, KDP, NXST, MYGN, WDFC, MHK, CARS, NVRO, CHKP, CECO, MDCO, BPT, CRK, CGC, MSI, NGVC, ERI, DGLD, TREE, SFIX, TRIP, SYNT, GPRK and TGNA

Stocks With Unusual Call Option Activity:

• 1) MNST 2) PAH 3) DE 4) XME 5) MAR

Stocks With Most Positive News Mentions:

• 1) FAST 2) ATVI 3) MYGN 4) DATA 5) KDP

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running -6.6% Below 100-Day Average
• 3 Sectors Rising, 8 Sectors Declining
• 40.3% of Issues Advancing, 54.8% Declining
• 40 New 52-Week Highs, 19 New Lows
• 51.70% of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.7%
• Vix 13.3 +5.5%
• Total Put/Call 1.0 +1.0
• TRIN/Arms 1.50 +105.0%

Wednesday Watch

Evening Headlines

Bloomberg:

• Yuan Bears Turn Bulls as a Weak Dollar Rescues China's Currency.

• Stock Futures Fall as Trump Reloads Tariff Bazooka. U.S. and Japan equity futures dropped with Treasury yields on news that the Trump administration is preparing the biggest list yet of Chinese goods to be hit with tariff increases. The yen climbed and the Aussie and kiwi retreated. Futures on the S&P 500 Index tumbled, ending the positive tone to equities enjoyed at the start of the week thanks to optimism about the corporate-earnings season. Treasuries rose at the end of Tuesday’s session as news about the plans emerged. The U.S. Trade Representative office said that President Donald Trump has ordered the preparation of a proposed list of $200 billion of Chinese imports for tariff hikes. Futures on the S&P 500 fell 0.8 percent. The underlying gauge earlier closed 0.4 percent higher on Tuesday. Futures on Japan’s Nikkei 225 dropped 0.7 percent.  

• Five Things You Need to Know to Start Your Day.  

• Reduce Prices or Expect Demand to Sink, Oil Guzzler Warns OPEC.   

• Blackstone to Seek More Than $20 Billion for Buyout Fund.  

• Kavanaugh Could Usher In Even More Business-Friendly Era on Supreme Court.

Wall Street Journal:

• U.S. Sets Tariffs on $200 Billion More in China Goods.

• Morgan Stanley Drops Succession Clue by Elevating CEO Contender.

• Oil’s New Technology Spells End of Boom for Roughnecks.

• Pfizer to Roll Back Price Increases After Trump Criticism.

• Trade Conflict Ripples Through Emerging Markets.

MarketWatch.com:

• Stock-market bulls look for earnings to trump trade-war fears.

• These five ‘mega trends’ are producing soaring stocks regardless of Trump, tariffs or the economy.

• Nvidia(NVDA) scores big win with Daimler, Bosch self-driving-car platform.

• Americans quitting their jobs at fastest rate since 2001 — and that’s a good thing.

Fox News:

• Schumer, Warren lash out over Supreme Court pick's call to shield presidents from criminal investigation.

CNBC:   

• Trump administration announces list of tariffs on $200 billion in Chinese goods.

• Tech companies and banks are expected to post big numbers this earnings season.

• Apple has 5,000 people working on autonomous cars, says criminal complaint against ex-engineer. 

• Employers are looking to fill millions of jobs. Here's where to find one.

• After-hours buzz: AIR, WDFC & more.

• Stocks have rallied since China trade war officially began as investors bet it won't escalate further.

• Walmart(WMT) and Target(TGT) will 'survive' against Amazon, says O'Leary. 

• America's Top States for Business 2018.

Zero Hedge:

• US Equity Futures Tumble As US Readies $200 Billion China Tariff List.

• As Global Debt Hits A Record $247 Trillion, The IIF Issues A Warning.

• Stock Buybacks Hit Record $680 Billion In The First Half.

• A Quarter Of Bill Gross' Fund Redeemed After Abysmal Returns.

• CO2 Emissions Hit 67-Year Low In Trump's America, As Rest-Of-World Rises.

• "Godfather Of Payday Lending" Stripped Of $64 Million, Sentenced To 14 Years.

• WTI Extends Gains After Big Crude Draw.

• Trade-War Buying-Panic Stalls As US Yield Curve Tumbles To Fresh 11 Year Lows.

Business Insider:

• China is building ties with Latin America, and now it has its eyes on a major trading hub.

• Housing demand in the US is unfazed by rising rates — even among millennials.

Night Trading 

• Asian equity indices are -.75% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 91.75 +.25 basis point. 

• Asia Pacific Sovereign CDS Index 14.50 unch.

• Bloomberg Emerging Markets Currency Index 70.05 +.24%.

• FTSE 100 futures -.50%.

• S&P 500 futures -.39%.

• NASDAQ 100 futures -.38%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (FAST)/.66

• (MSM)/1.39

After the Close:

• (OZRK)/.89

Economic Releases 
8:30 am EST

• The PPI Final Demand MoM for June is estimated to rise +.2% versus a +.5% gain in May.

• The PPI Ex Food and Energy MoM for June is estimated to rise +.2% versus a +.1% gain in May.

10:00 am EST

• The Wholesale Trade Sales MoM for May is estimated to rise +.5% versus a +.8% gain in April.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -3,893,750 barrels versus a +1,245,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -922,180 barrels versus a -1,505,000 barrel decline the prior week. Distillate inventories are estimated to rise by +863,640 barrels versus a +134,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.19% versus a -.4% decline prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Williams speaking, NATO Summit, Monthly OPEC Oil Market report, Australia Lending report, weekly MBA Mortgage Applications report, $22B 10Y T-Note auction, (COST)/(ZUMZ) Monthly Sales reports and the (GIS) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by industrial and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 100% net long heading into the day.